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Marqeta, MoneyLion and Verituity: adapting to the fintech crisis | PaymentsSource

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Marqeta, MoneyLion and Verituity: adapting to the fintech crisis |  PaymentsSource

Marqeta has diversified its revenue sources beyond Block, its largest customer

David Paul Morris/Bloomberg

Two years after the start crisis for payment technology companies, investors are still demanding, pressure companies to demonstrate a mix of reliable tax performance, diversified products and the ability to acquire high-profile partners.

According to experts, venture capital investments in financial technology companies, which include payment fintechs, fell 42% in 2023, from about $62 billion to $35 billion. S&P Global Markets. In 2022, funding fell 32%, compared to $91 billion in 2021. While S&P reports there are signs the pace of decline is easing, analysts say the payments technology sector still has too many vendors and not enough buyers.

“I don’t feel like the market has turned a corner,” said Aaron McPherson, director of AFM Consulting. “The fintech space continues to be crowded, which makes growth difficult.”

As a result, more consolidation is likely, McPherson said. “I keep seeing layoffs in the industry, which suggests earnings continue to be under pressure,” McPherson said.

A sampling of companies, including Marqeta, MoneyLion and Verituity, discussed how they have changed their businesses to stay relevant in a challenging market.

“There’s not a lot of money invested in fintech,” said Todd Pollak, chief revenue officer at Marqeta.

Neighborhood party

Marqueta’s success has traditionally been tied to Block, which has long provided the bulk of its revenue. Market pressures are leading Marqeta, an Oakland, California-based company founded in 2010, to seek more partners and customers.

“Even a year and a half ago, the No. 1 argument was that our Block partnership represented 70% of revenue,” Pollak said, adding that this share is now just under 50% following a restructuring that included a Marqeta leadership review. “This customer diversification is incredibly important.”

Marqeta reported gross profit of $84 million in the latest quarter, down 6% from about $89 million, year over year. Total payment volume was $67 billion, up 33% from approximately $50 billion. Marcheta’s actions it trades at around $6 per share. That’s down from a peak of over $30 in 2021.

Marqeta recently partnered with Klarna to power the company’s buy now/pay later payment card; and payments company Rain, which supports earned wages access programs for Hilton, McDonald’s, Arby’s and Subway. Marqeta has also expanded its partnership with Uber Eats to Canada, Australia, Mexico, Brazil, Colombia, Peru, Chile and Costa Rica. “There is a flight to quality,” Pollak said, adding that potential customers are looking search for payment companies that can demonstrate financial strength.

Amid this push to diversify its clients, Marqueta’s relationship with Block is growing, Pollok said. For example, Marqeta is involved in the expansion of Afterpay, a “buy now/pay later” company. Block acquired in 2021.

Learn to rotate

Demonstrating profitability was a “watershed moment” for MoneyLion, according to Dee Choubey, founder and CEO of MoneyLion.

MoneyLion in its latest quarter reported net revenue of $121 million, or 29% from the $102 million reported a year earlier. It also reported net income of $7.1 million for the quarter, up from a loss of $9.2 million a year earlier. New York-based MoneyLion was founded in 2013.

“The fintech industry is saying it is no longer possible to finance multiple loss-making products,” Choubey said. “This is good for the whole industry and it’s good for innovation.”

MoneyLion’s stock price fell from a high of more than $360 per share after its IPO in 2001 to a low of less than $10 in 2023. Its stock price has since returned to around $80 per share.

Over the past two years, the company has focused on savings accounts, moving away from a strategy that deemphasized consumer loans tied to future payments. The company is also focusing on AI-powered product search.

These efforts have helped it expand its customer base from 7.8 million to 15.5 million in the past year. MoneyLion is currently testing technology that uses large language models to analyze transactions to improve advice and other content provided to its customers.

The company’s diversification strategy is based on partnerships such as a February collaboration with EY adding MoneyLion’s embedded payments platform to EY’s US division, supporting the consultancy’s strategy to help bank clients with digital automation projects.

“We went from a neobank to a platform business,” Choubey said. “You can interact with tools to find different types of products and tools without having to be a digital banking customer. We want you to be, but you don’t have to be.”

Move faster in a crowded market

Despite the funding slowdown, the payments technology market may still have too many companies, due to the surge of digitally focused startups during the pandemic.

“There is excellent intellectual property available but not enough market to support all the sellers who want to sell it,” said Aaron Press, director of research at IDC, who like McPherson believes industry consolidation is likely.

Some of the consolidation will come from established vendors looking to replace legacy platforms or branch into adjacent spaces, Press said The FIS strategy includes the desire for acquisitions. “And some will be combinations of smaller companies trying to create scale.”

Verituity, a privately held business-to-consumer and business-to-business payments company founded in 2020, has recently increased its focus on selling faster and discounted cross-border payments. It has integrated with Mastercard’s portfolio of U.S. and international money transfer options to support a range of near-real-time business payments that don’t necessarily use dedicated instant processing networks.

“There is still some change to be made in the payments industry. There have been a lot of payments companies created in the last few years,” said Ben Turner, CEO and president of Verituity, which is based in McLean, Virginia.

To support its strategy, Verituity cited Mastercard Search which found that 33% of consumers experienced delayed or failed cross-border payments, potentially impacting cash positions, bill payments or other issues. The expansion of real-time payments presents an opportunity, Turner said, even if companies don’t adopt the two major U.S. real-time processing networks, FedNow and/or The Clearing House’s RTP Network.

“Instant payments are not as important as on-time payments,” Turner said, adding that non-real-time options can be less expensive. “There are many options that do almost the same thing as instant payments.”

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We are the editorial team of FinCrypt, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on FinCrypt, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

FinCrypt Staff

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Summer Trading Network 2016

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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What changes in financial regulation have impacted the development of financial technology?

FinCrypt Staff

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Block Telegraph Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

  • PSD2 revolutionizes access to financial technology
  • GDPR Improves Fintech Data Privacy
  • Regulatory Sandboxes Drive Fintech Innovation
  • GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

FinCrypt Staff

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M2P Fintech About to Raise $80M

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

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Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

FinCrypt Staff

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Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

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  • Aveni Assistance
  • Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”

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